Citation preview
Gattaca plc Annual Report and Accounts
2020
unts 20 20
We exist to connect people and create valuable opportunities
between them By providing recruitment solutions and support to
clients in our chosen markets and to candidates with engineering
and technology skills, we help to unleash potential in people,
projects and companies.
For further information go to: www.gattacaplc.com/investors
Overview 1 Highlights
Officer’s Review
24 Operating Review
34 Responsible Business
44 Risk Management
Corporate Governance 56 Chairman’s Introduction
to Governance
Report
94 Consolidated and Company Statements of Changes in Equity
96 Consolidated and Company Statements of Financial Position
97 Consolidated and Company Cash Flow Statements
98 Notes Forming Part of the Financial Statements
Contents
REVENUE FROM CONTINUING OPERATIONS
£538.7m (2019 restated1: £634.3m)
£54.3m (2019 restated1: £69.1m)
Operational highlights
1 2019 figures have been restated for the presentation of
operations discontinued in 2020 as explained in Note 11 of the
consolidated financial statements.
2 Net fee income is equivalent to gross profit, being revenue less
cost of sales.
3 Underlying results are defined as total consolidated results less
non-underlying items, amortisation and impairment of goodwill and
acquired intangible assets, impairment of plant, property and
equipment and right-of-use assets and foreign exchange
differences.
• Against the backdrop of the
COVID-19 pandemic and periods
ensure that operations continued
seamlessly. Whilst contractor and
continues to prove it is a resilient
and substantial business that can
operate at scale
continuity of candidate supply
science, technology, engineering
Solutions business, continuing
clients through challenging
circumstances this year
cash position through strong
the pandemic we maintained
Improvement Plan, choosing
planned changes focused around
improving sales impact and
Financial highlights
Pages 22 and 37
£4.6m (2019 restated1: £11.7m)
£1.4m (2019 restated1: £3.4m)
10.3p (2019 restated1: 28.4p)
Page 6
01Strategic Report Governance Financial StatementsOverview
Highlights
Gattaca is a leading provider of engineering and technology
recruitment solutions We aim to be the number one choice for
outsourced solutions and specialist recruitment in our chosen
markets.
CONTRACT VS PERMANENT NFI SPLIT
Permanent 27%
Contract 73%
UK Engineering £39.8m 73.3%
UK Technology £8.0m 14.7%
Americas £5.3m 9.7%
02 Gattaca plc Annual Report and Accounts 2020
With 36 years’ experience of finding flexible and permanent talent,
the Group consists of a number of specialist recruitment brands
including an engineering recruitment specialist (Matchtech) and a
technology recruitment specialist (Networkers).
For critical recruitment drives, our premium service combines
campaign management, regular insight and reporting, and dedicated
sourcing support to meet our clients’ demands. This means we take
ownership of finding the people our clients need whilst they focus
on their core priorities.
Our bespoke market insight reports help our clients understand the
demographics, pay, experience, diversity and availability of the
candidate markets they are looking at. We offer a range of services
depending on the depth of insights our clients need.
Our Services
Matchtech is an engineering recruitment specialist.
Networkers is a technology recruitment specialist.
Resourcing Solutions is a rail engineering recruitment
specialist.
Barclay Meade is a professional services recruitment
specialist.
Alderwood is a STEM skills training recruitment specialist.
Gattaca Solutions provides flexible, permanent and total workforce
solutions.
Gattaca Projects provides professional, expert outsourced
engineering and technology support solutions, working from our UK
offices and from client sites.
We deliver total solutions to improve the quality, compliance and
experience of our clients’ hiring processes, for both their
flexible and permanent workforces. Utilising the Group’s 36 years
of experience in the STEM skill market, we create innovative
solutions to enhance our clients’ workforce strategies, covering
compliance, visibility, cost savings, quality and process
efficiency. Our solutions are perfectly tailored to companies with
demand from the engineering and technology skills sectors.
Gattaca Projects provides professional and expert outcome- based
engineering and technology support solutions.
We help our clients attract, engage and retain talent by unlocking
the potential of their employer brands. We provide a full employer
branding agency service with a unique difference; we know candidate
attraction inside out, especially in skill short markets.
Workforce solutions Engineering & technology projects
Talent attraction & employer branding
Market Overview
The global staffing market The global staffing market has shown
early signs of a rebound after a challenging 2020; within this some
areas have been impacted more than others, with the market dynamics
changed.
As in previous recessions, contract labour demand is expected to
increase as companies opt for flexibility whilst they assess their
medium and long-term work pipelines. This plays to one of our core
strengths, given our 73% contract focus. Permanent recruitment,
which was heavily impacted globally, has begun to rebound but many
companies are reporting a longer time to hire, with more hesitance
around hiring. There has also been an increase in offer refusals as
candidates show less commitment to moving organisations.
In the short term, the highly fragmented staffing market will
consolidate as many companies shrink or fail to survive. However,
in the medium term we expect to see further fragmentation as some
redundant perm recruiters opt to set up their own
organisations.
Understanding the trends and opportunities COVID-19 has impacted
demand in many of our markets. It is clear that some, such as
Infrastructure and Technology, will see rapid recovery and indeed
growth and therefore we have increased our focus on those areas.
Others, such as Mobility will be slower to recover and for these we
will seek to sustain our strong market position.
04 Gattaca plc Annual Report and Accounts 2020
Infrastructure • Highways,
Our Markets
For clients, the pressures of COVID-19 have highlighted the
importance of ease of visibility, communication, cost control,
compliance and digital infrastructure, and this will encourage more
clients towards Managed Service Provider (‘MSP’) for contract
labour and Recruitment Process Outsourcing (‘RPO’) for permanent
hiring services. Company Boards needing a simple, consolidated view
of their extended workforce and the ability to control this with
ease, is especially relevant for contract MSP. In addition, many
organisations have been forced to downsize or close their in-house
recruitment function, with recruitment levels having all but
stopped for many companies. Rather than invest again without
confidence in the stability of demand, companies will seek to
engage with a flexible partner model, one able to ramp up and down
with demand that can also provide the services of a fully
outsourced programme.
Engineering and technology talent Labour markets globally have seen
a huge increase in unemployment with large volumes of people being
released. However within the STEM skills market there has been a
drop in demand whilst companies reassess operating processes,
future workload and investment programmes.
Companies are also accelerating their digitalisation strategies in
the wake of mass working from home, which is resulting in an
increase in IT investment.
For a transient global candidate workforce, the limitations around
mobility have meant less movement across borders by engineering and
technology candidates. However, as companies begin to utilise the
benefits of remote working, candidate availability for companies
outside traditional ‘hub’ locations will result in a larger volume
of opportunities to our already in- demand candidates and clients
able to access a wider pool of talent.
United Kingdom In the UK, changes to the IR35 legislation, which
created some challenges in the UK contract staffing sector in the
early part of our year, have been delayed and are now due to be
launched in April 2021. This change in the private sector shifts
the liability for assessment of tax status from a contractor’s
personal service company to the client utilising the services.
Companies have not necessarily used the time from the delay to
better prepare themselves for the impending changes, however, the
fact that many workers are now able to complete packaged
assignments from a location of their choice means previously
antiquated operating processes have changed.
This could result in greater scope for some contractors to
demonstrate their independence and where there is greater supply
than demand, may mitigate the impact of the IR35 changes in
2021.
There is still significant opportunity to grow our market share in
the UK, as commitment to long-standing public- funded programmes
will continue to drive growth across many of our markets, such as
Defence, Infrastructure, Utilities and Energy.
International Our International locations have seen varying degrees
of impact due to COVID-19. Countries with a higher STEM population
and advanced digitalisation of business processes have shown
greater resilience and quicker bounce back on demand. Much of our
focus is around the Finance and Energy markets which have been
impacted globally, but on the whole STEM demand has remained.
Decreased candidate mobility, as a result of travel restrictions,
has meant that for some skills, such as blue collar and heavy
engineering, there has been a shift in client requirements towards
local candidates. In contrast, the increased capability of
individuals to work remotely has increased the candidate catchment
options for other white collar and technology skills, enabling us
to tap into our wider talent pools for potential cross border
assignments.
Life Sciences • Pharmaceutical • Medical
& Distribution • Nuclear • Mining & Extraction
Defence • Air • Land • Sea • Communications
Mobility • Aerospace • Automotive • Maritime & Shipping
Finance, Banking & Insurance • Banking • Insurance •
Fintech
Public Sector • Central
Strategic Report Governance Financial statements 05Overview Market
Overview
Maintaining focus whilst demonstrating resilience in unprecedented
times
“ This year has been very different for everyone. Nothing could
have prepared anyone for the scale of the COVID-19 pandemic.”
Patrick Shanley Non-Executive Chairman
06 Gattaca plc Annual Report and Accounts 2020
and to that end we have reduced annualised costs by a further £4m
going forward. In addition, we took the decision during the year to
exit our operations in China. We had been very explicit when we
decided to retain the overseas operations that they needed to
continue to create value – our Chinese business could not reach the
levels of profitability which we demanded.
Our focus to reduce net debt has been hugely successful. We ended
the year with adjusted net cash (excluding lease liabilities) of
£27.3m, an improvement of £52.1m over the previous year. Part of
that improvement is the result of our ability to access £13.8m of
non-recourse debt financing and a further £10.3m in deferred
payments to the UK Government in the form of delayed VAT payments,
which become repayable at the end of March 2021. Irrespective of
these one-offs we have been able to reduce debt by £11.1m through
improved control of working capital including the move of some
contractors to four-weekly payment terms. We have significant
liquidity of £58.5m at the year-end, being our cash resources and
our undrawn invoice financing facility, and since year-end have
repaid and cancelled our Revolving Credit Facility thereby removing
all covenants going forward. Whilst recruitment businesses
typically require increased working capital in times of growth, the
change in contractor terms will offset some of this as trading
improves with the recovery from the pandemic and we expect to
maintain a strong net cash position.
Dividend We are conscious that this will be the second year where
the Board have not recommended a dividend. We feel that given the
economic headwinds the UK is facing over the next six months it
would not be prudent to do so at this time. We are however
committed as a Board to restoring the dividend at the earliest
opportunity.
Board We would like to thank Richard Bradford who is stepping down
as a Non-Executive Director at this year’s AGM after nine years’
service for his contribution to the Group. His wise counsel and
knowledge of our industry will be sorely missed. We are proactively
seeking his replacement which we are hopeful will start to address
the diversity imbalance on the Board.
Outlook Gattaca’s focus on in-demand STEM skills, in addition to
the measures we have taken to strengthen the business, positions us
well for the eventual, and inevitable, recovery in our core
markets. Whilst we remain cautious as to the timeframe for the
recovery, and the nascent second wave of the COVID-19 pandemic and
the potential for an extended second lockdown in England adds
further uncertainty to the near-term outlook, we are encouraged by
the initial signs of improvement we have seen in the first few
months of the new financial year, with increased numbers of
contractors, from the low period of May, and some of our major
clients seeking more permanent roles.
We have brought more staff back from furlough in anticipation of
economic recovery and we will cautiously monitor activity over the
coming months particularly given the recently announced second
national lockdown. Whilst we expect the first six months to remain
challenging, we are hopeful that the second half will see further
improvement. We are confident that the changes we have made in the
business leave us better placed to deal with whatever economic
conditions we may face in the short term and to better benefit from
the upside of the eventual recovery.
Patrick Shanley Non-Executive Chairman
3 November 2020
This year has been very challenging, not just for Gattaca but for
the UK in general. In early 2020 we saw some early softening in
demand but the scale of the COVID-19 pandemic and subsequent
lockdown in March was unprecedented. As with all great shocks to
the system there are many true unsung heroes who keep the wheels
turning. For us it was the numerous colleagues in our back office
functions who enabled the entire business to work from home with
only 48 hours’ notice and still ensure our contractors were paid on
time. Meanwhile our sales teams were supporting clients and
contractors whilst our marketing team focused on internal
communications to the dispersed group. In addition, in solidarity
with our furloughed colleagues, everyone, at all levels of the
business, took a 20% reduction in salary up until July. We truly
have a strong family culture and the Board wish to express our
gratitude to all the family at Gattaca.
Overview We have maintained focus on the continuation of the Group-
wide Improvement Plan that we discussed last year, and indeed have
accelerated its implementation over the past 12 months. We are
determined to make sure the business has the foundations to operate
well in the coming years, with improved sales management and the
reinforcement of a performance culture. Whilst to some extent the
progress we have made in the business has been masked by the impact
of the pandemic, the improvements we have implemented leave us well
placed to exploit the upside when the economy improves.
A consequence of both the acceleration of the Improvement Plan and
the impact of the pandemic on many of our clients has regrettably
been the loss of a number of jobs across the Group. At this stage,
we are clear that, so long as the pandemic is around, we will need
to keep a clear focus on costs
Strategic Report Governance Financial Statements 07Overview
Chairman’s Statement
Our objective is to be the leading provider of specialist
engineering and technology staffing solutions in our chosen
markets
Investment Case
• STEM skills are especially in demand across geographies and
end-markets, driven by growing importance of the digital economy
and the forecast emergence from a global pandemic
• Well-established and scalable UK business, with further growth
and market share opportunity
• Expertise and specialist focus being leveraged internationally,
particularly in the Americas where there is growth
opportunity
Defined, long-term high-growth markets
• A leading provider of specialised and in-demand engineering and
technology skills
• Ability to deliver tailored solutions and products
• Broad client base and long-term partnerships
• Recently recognised with first time awards in:
– HRO Today ‘Bakers Dozen’ as one of the top RPO providers in the
EMEA region
– TIARA Talent Solutions ‘Best Candidate Experience’
08 Gattaca plc Annual Report and Accounts 2020
An established, trusted partner providing innovative solutions with
clear opportunities to scale in growth markets.
• Deep skill and market-based expertise within the business
• A motivated management team that brings fresh perspective and
drive to professionalise the business
• Group-wide Improvement Plan in place and delivering accelerated
performance
• Transformation under way, professionalising market approach, with
rigour and clear methodology being applied to sales
• Cross-selling and focus on growing share of client staffing spend
provides growth opportunity
• Integrated, Group-wide technology platform being implemented,
maximising productivity and allowing cross-discipline working
• Investing in organic growth in geographies with clear growth
prospects
• Growing and investing in Gattaca Solutions services which embed
Gattaca within client operations and deliver incremental margin
improvement
• A more agile, scalable business being built
• Focused on STEM skills which will remain in-demand
• Significantly strengthened and robust balance sheet and financial
resilience
• Progressively degearing
• Contract-perm NFI split of 73/27 continuing business provides
more predictable and recurring revenues
• A growing Gattaca Solutions business, further increasing quality
of revenue
• Core focus of the business is contract placements which provides
resilience but the permanent placement market provides further
growth opportunity
Deep expertise with revitalised leadership
Focused growth strategy
Resilient business model
Page title
16 The Improvement Plan
20 Our Business Model
24 Operating Review
34 Responsible Business
44 Risk Management
Strategic Report
11
This year’s highlights • We have navigated the pandemic,
supporting our clients, candidates and people, proving ourselves to
be a resilient business
For further information Page 22 and 37
• Continued success of our Gattaca Solutions business, as it was
recognised for the first time through industry awards
For further information Page 14
• We accelerated the Improvement Plan, focussing our approach and
reducing cost
For further information Page 16
• We took decisive action to strengthen our balance sheet
For further information Page 32
CONTI NUIN
12 Gattaca plc Annual Report and Accounts 2020
Introduction Gattaca continues to play a key role partnering with
our clients across multiple sectors and geographies to deliver the
engineering and technology talent they need as they work through
the economic and business recovery. I am proud of the way our staff
have responded to support clients, contractors and candidates
without any interruption to operations. Our business is resilient
and we continue to make good progress with the Improvement
Plan.
As with most businesses across the globe our results for the year
have been impacted by the COVID-19 pandemic, Net Fee Income from
continuing operations of £54.3m was 21% lower than prior year.
Notwithstanding this, the Group delivered £4.6m of continuing
underlying profit before tax, eliminated debt and is now in a
strong net cash position. Whilst some of the improvement in our
cash position was the result of an unwinding of working capital due
to lower trading levels, a material element was driven by specific
actions which have strengthened our balance sheet. We expect much
of the improved position to be permanent, and as our business
recovers we expect a lower rate of working capital requirement
given the changes to our operating model.
Overall market During the first half of FY20, UK market conditions
were particularly challenging driven
by political uncertainty before the General Election, ongoing
Brexit uncertainty and the proposed IR35 regulatory change. These
external factors combined to slow investment decisions and client
recruitment in both temporary and permanent markets.
As one would expect, the outbreak of COVID-19 resulted in an
immediate and major decline in client requirements in the second
half of the year. Whilst companies continue to recruit during this
period, volumes were significantly reduced in a relatively short
time frame. Towards the end of the financial year we saw numbers
stabilise and subsequently there have been early indications that
activity and client confidence levels are increasing, prompting us
to take the decision to bring staff back from furlough.
Many of the market sectors we support remained active during the
initial lockdown period, in particular Infrastructure, Defence,
Energy and Technology. Whilst we were impacted with reduced
activity, our core focus on STEM skills and the contract market
helped us deliver a resilient performance.
Operational response to the COVID-19 situation As the potential
impact of the pandemic became apparent, our immediate priorities
were to ensure our staff were able to work in a safe and stable
environment; and to support our clients, contractors and
candidates.
We commenced detailed planning and volume testing of our systems
and processes in February and the entire Group was fully
operational on a remote working basis by the end of the first week
of the UK lockdown in March. We had fully remote working for
several months and have since moved to a hybrid approach.
The lockdown necessitated the acceleration of many of our
digitisation plans, achieving in weeks what may have otherwise
taken months and we will retain the benefits of this in the years
to come.
With no service interruptions, we ensured operational capability,
and were able to fully deliver our part of the supply chain. We
maintained existing contractor support where clients required this;
delivered new skills to existing clients and began servicing new
clients. We were able to tailor our business model to support our
individual clients.
We took a number of actions to ensure the ongoing financial
stability of the business, both in terms of cost mitigation and
liquidity maximisation.
The furlough scheme introduced by the UK Government was welcomed
and enabled us to support employees and some contractors whose
roles would otherwise have been at immediate risk. We moved early
to work proactively with clients to offer furlough support to
contractors where this was possible.
We are positioned well to support our clients with the critical
STEM skills needed for recovery.
13Overview Governance Financial StatementsStrategic Report Chief
Executive Officer’s Review
Chief Executive Officer’s Review continued
Accelerating the Improvement Plan and cost reduction Following my
appointment, we launched the Group-wide Improvement Plan in order
to build on the fundamental strengths of the business to deliver
long term sustainable growth.
The business was organised and united around delivering the Plan,
focusing on our four strategic priorities:
• Customer Focus – growing our customer base and deepening
relationships
• Product and Innovation – innovating and developing products to
meet customer needs
• Service Delivery – enriching the customer experience and
enhancing our service delivery capability
• Operational Excellence – improving organisational alignment and
performance
I am pleased to report good progress this year. Not only did we
maintain the pace of change during the pandemic, we accelerated
certain elements including client service and efficiency, leading
to cost reduction and focused sales improvement. This was
recognised externally after the year end as our Gattaca Solutions
business was included in HRO Today’s ‘Bakers Dozen’ for being one
of the top Recruitment Process Outsourcing (‘RPO’) providers, for
the first time. This is significant to us as companies are placed
on the list based solely on customer feedback, making it a highly
credible accolade.
We have implemented a focused approach to how we target industry
sectors and are aligning our talent more closely to our operating
model across the Group which will enable us to improve our sales
effectiveness. This has seen the Group working more closely with
existing clients and accelerating new client relationships to
better support them with solutions for their talent needs as well
as achieving cost efficiencies across the Group.
Internally the restructuring of the Technology business unit was
completed during the year, and it has now started rebuilding for a
recovery. Prior to COVID-19, the first green shoots of recovery
were emerging in the business with NFI run rates flattening out
after the decline of the last three years, providing evidence that
the strategy is working for us.
Our centralised Fulfilment operation was scaled during the year and
the business was reorganised to form a core dedicated fulfilment
capability across all our locations. This is enabling a more agile
response to client and market needs.
The Gattaca Solutions business, which is fully aligned under our
Fulfilment operation under the same senior management continued to
perform strongly, out-performing our traditional staffing business
in difficult markets.
Internationally, our size relative to the overall market for
engineering and technology skills highlights the importance of
defining and focusing on our specific niches. During the year, we
worked to closer align our International operations with the rest
of the business. This has enabled increased collaborative business
development activities, resulting in quicker client acquisition as
well as greater niche skill delivery capability across borders. As
the business matures and it continues to leverage the experience we
have within the Group, we have started to develop more meaningful
long- term relationships with some of our international customers
by
moving to delivering RPO solutions and exclusive recruitment
projects, where we have considerable experience to draw upon from
our UK operations. We see these more sustainable relationships as
key to the long-term success of our International business. During
the year, as previously announced we ceased operational activity in
China as we prioritised other markets.
Notwithstanding the challenging economic environment, we maintained
our planned systems investment. Our Primary Business System project
maintained pace during the lockdown period and we have our first UK
subsidiary live on the system, with the rest of the Group coming
online before the end of the 2021 financial year. This investment
will be transformational for ways of working and the level of
business insight and understanding across the Group.
We also implemented a number of other technology applications
during the year to improve our client, candidate and staff
experience. We integrated a new digital platform for our Gattaca
Solutions accounts that brings greater automation, increased
flexibility and enables us to implement new solutions
quicker.
“The service that Matchtech provided
was essential in ensuring we could get the people
needed to ensure we could get the ventilators to the
hospitals as quickly as possible.”
14 Gattaca plc Annual Report and Accounts 2020
We continue to invest in tools to support our operations
introducing new applications to support real time communication,
collaboration, digital coaching and training and development to
create an efficient and engaging digital workplace.
In combination with the above actions aimed at driving agility and
promoting growth throughout the Group, we also undertook measures
to reduce costs in the business. Post period end we completed a
restructuring which will achieve £4.0m in annualised cost
reductions from November 2020.
People During the year I was delighted to appoint Claire Cross as
our new HR Director. Claire brings with her extensive industry
experience and knowledge of our Group. Beyond her HR expertise, her
background includes operational
sales experience and she will be instrumental to our plans as we
continue to grow and develop the organisation.
The pandemic has been unparalleled in terms of its impact on people
both in their business and personal lives. I have been truly
humbled by the way our Gattaca team has and continues to rise to
the challenges we and our clients are navigating and I want to take
this opportunity to thank them for their dedication, resilience and
hard work.
Looking forward Notwithstanding the obvious uncertainty in global
markets, in the longer term there are significant opportunities in
our chosen sectors. Prior to the COVID-19 pandemic the demand for
STEM skills, our core focus, was growing significantly and, whilst
we remain cautious as
to the timeframe for economic recovery and the potential impact of
an extended second lockdown in England, we have been encouraged by
the signs of increased activity in our core markets in the first
few months of the new financial year. With further benefits from
our Improvement Plan to come, and our robust and covenant-free
balance sheet, we are confident that Gattaca is well- placed for
the future.
Kevin Freeguard Chief Executive Officer
3 November 2020
Supplying essential ventilators In March 2020, medical device
company Penlon proudly stepped up to make ventilators that were
vitally needed to save lives during the pandemic. Historically, the
UK did not manufacture a suitable critical care ventilator and
established international providers were struggling to cope with
their own domestic demand. Penlon responded to the UK Government’s
‘call to arms’ for support and joined a consortium of businesses to
produce ventilators. In April 2020, the UK Government placed an
order for 15,000 Penlon ESO 2 Emergency Ventilators.
In a matter of days, Penlon successfully transformed their company
from a daytime batch production business to a 24/7 operation,
providing technical back-up to the consortium manufacturing sites
and taking on the important role of testing and quality checking
the ventilators before despatch to the NHS.
We quickly responded by establishing a 24- hour support team that
worked around the clock to provide Penlon with the contractors
needed to test the ventilators as rapidly as possible to ensure the
ventilators could reach hospitals throughout the UK. This entailed
sourcing, screening and placing a workforce of contractors during
the height of the UK lockdown.
15Overview Governance Financial StatementsStrategic Report Chief
Executive Officer’s Review
.
The Improvement Plan
Sell to a market Add value by product Customer focus Product &
innovation
Strategic priority • Growing the customer base, deepening customer
relationships • Innovating and developing products to meet customer
needs
What we said we would do
• Create an aligned go to market plan with consistent
execution
• Sell the full range of our products to our existing customer base
and implement a structured approach to new client acquisition
• Focus on markets that offer significant, scalable and sustainable
profit potential
• Enhance customer focused product offerings
• Extend our outsourcing capability
• Further develop business models and partnerships
What we did • Focused on extending our services to a wider range of
new clients by aligning around a targeted market approach. We
implemented a cross-sector engagement campaign across our customer
base, as well as a dedicated strategy for lapsed clients. For new
clients, we began targeting companies we had not previously worked
with through a structured sales approach
• Launched a sales enablement hub with self-serve access to all
sales and marketing collateral, ensuring our sales staff can sell
our full range of products in a consistent way
• Enacted a new sales and marketing methodology that aligned the
capabilities we have across the Group to our talented networks and
partnerships externally. We launched an Insights and Knowledge hub
and built a calendar of events and webinars, enabling us to support
clients in making informed business decisions, targeted at
workforce management within the STEM market
• We focused sales and marketing efforts on our well-established
markets that continue to show growth potential such as
Infrastructure, Technology and Defence, whilst also reacting
quickly to align to new fast growing areas as they emerge, such as
sourcing skills for fibre implementation
• All International operations have been aligned to our markets and
we have created a global market approach enabling more effective
international client acquisition through leveraging the capability
we have in the UK
• Took Gattaca Project’s service offering into new markets and
increased the scale of the project work it completes, resulting in
winning our largest statement of work project to date
• Continued to evolve our core product offering in line with market
and customer needs, for example:
– From April 2021, private sector organisations will need to comply
with IR35 reforms, or face substantial risk and cost. We launched
an IR35 hub on our website which included an assessment tool and
free consultations
– We continued to grow our Employer Branded Services offering,
supporting customers in building their employer brands, employer
value propositions, and attraction, engagement and retention of
candidates
• Integrated a new digital platform for Gattaca Solutions accounts,
enabling us to improve the customer experience and embed new
solutions faster, and extended our Gattaca Solutions service
offering and geographical coverage further into the US
• Launched our Associate network, our community of experienced
professionals with proven experience across a broad spectrum of
industries and customer ‘pain points’
• We continue to maintain and build partnerships and affiliations
that support our business model and market presence, such as
working with Women into Construction and being appointed as an
Executive Network member of the Institute for Collaborative Working
(‘ICW’), a key partnership as collaboration is at the heart of our
purpose
Priorities for next year
• There is still more progress to be made in embedding our more
targeted market approach. The priority for 2021 will be to target
new client acquisitions and deepen existing relationships through
the new sales and marketing approach by continuing to build out and
promote our suite of resources, insights and events for lead
generation
• Continuing to maximise and build our position in the high growth
STEM market across all our geographies, whilst growing our
understanding of current market trends and skills shortages in
order to flex and respond to new growth services and skills
demands
• Continuing to strengthen the Technology business using our
structured market approach to help us support a wider range of
companies requiring technology skills
• Further leveraging UK product capability to access new revenue
lines in our International operations
• Take on further outsourcing responsibilities within our current
client base to develop partnerships, ensuring we drive appropriate
solutions into the marketplace in a timely manner to capitalise on
any opportunities
• Utilise our sales and marketing approach to gain further insights
from our customers on their ‘pain points’, combined with our
knowledge of market trends and future economic challenges, to drive
innovation throughout our product range
The Improvement Plan Aligned to our strategic pillars, the
Improvement Plan, launched last year, was about taking the
fundamental strengths of the business and evolving them to deliver
long-term sustainable growth.
The business was organised and united around delivering the Plan.
We implemented four key workstreams in order to grow our customer
base and deepen relationships, innovate and develop products to
meet needs, enhance our service delivery capability and improve
organisational alignment and performance.
16 Gattaca plc Annual Report and Accounts 2020
.
Strategic Report The Improvement Plan
Sell to a market Add value by product Customer focus Product &
innovation
Strategic priority • Growing the customer base, deepening customer
relationships • Innovating and developing products to meet customer
needs
What we said we would do
• Create an aligned go to market plan with consistent
execution
• Sell the full range of our products to our existing customer base
and implement a structured approach to new client acquisition
• Focus on markets that offer significant, scalable and sustainable
profit potential
• Enhance customer focused product offerings
• Extend our outsourcing capability
• Further develop business models and partnerships
What we did • Focused on extending our services to a wider range of
new clients by aligning around a targeted market approach. We
implemented a cross-sector engagement campaign across our customer
base, as well as a dedicated strategy for lapsed clients. For new
clients, we began targeting companies we had not previously worked
with through a structured sales approach
• Launched a sales enablement hub with self-serve access to all
sales and marketing collateral, ensuring our sales staff can sell
our full range of products in a consistent way
• Enacted a new sales and marketing methodology that aligned the
capabilities we have across the Group to our talented networks and
partnerships externally. We launched an Insights and Knowledge hub
and built a calendar of events and webinars, enabling us to support
clients in making informed business decisions, targeted at
workforce management within the STEM market
• We focused sales and marketing efforts on our well-established
markets that continue to show growth potential such as
Infrastructure, Technology and Defence, whilst also reacting
quickly to align to new fast growing areas as they emerge, such as
sourcing skills for fibre implementation
• All International operations have been aligned to our markets and
we have created a global market approach enabling more effective
international client acquisition through leveraging the capability
we have in the UK
• Took Gattaca Project’s service offering into new markets and
increased the scale of the project work it completes, resulting in
winning our largest statement of work project to date
• Continued to evolve our core product offering in line with market
and customer needs, for example:
– From April 2021, private sector organisations will need to comply
with IR35 reforms, or face substantial risk and cost. We launched
an IR35 hub on our website which included an assessment tool and
free consultations
– We continued to grow our Employer Branded Services offering,
supporting customers in building their employer brands, employer
value propositions, and attraction, engagement and retention of
candidates
• Integrated a new digital platform for Gattaca Solutions accounts,
enabling us to improve the customer experience and embed new
solutions faster, and extended our Gattaca Solutions service
offering and geographical coverage further into the US
• Launched our Associate network, our community of experienced
professionals with proven experience across a broad spectrum of
industries and customer ‘pain points’
• We continue to maintain and build partnerships and affiliations
that support our business model and market presence, such as
working with Women into Construction and being appointed as an
Executive Network member of the Institute for Collaborative Working
(‘ICW’), a key partnership as collaboration is at the heart of our
purpose
Priorities for next year
• There is still more progress to be made in embedding our more
targeted market approach. The priority for 2021 will be to target
new client acquisitions and deepen existing relationships through
the new sales and marketing approach by continuing to build out and
promote our suite of resources, insights and events for lead
generation
• Continuing to maximise and build our position in the high growth
STEM market across all our geographies, whilst growing our
understanding of current market trends and skills shortages in
order to flex and respond to new growth services and skills
demands
• Continuing to strengthen the Technology business using our
structured market approach to help us support a wider range of
companies requiring technology skills
• Further leveraging UK product capability to access new revenue
lines in our International operations
• Take on further outsourcing responsibilities within our current
client base to develop partnerships, ensuring we drive appropriate
solutions into the marketplace in a timely manner to capitalise on
any opportunities
• Utilise our sales and marketing approach to gain further insights
from our customers on their ‘pain points’, combined with our
knowledge of market trends and future economic challenges, to drive
innovation throughout our product range
“Despite the impact of the COVID-19 pandemic, the Board and I
maintained our focus on our strategy, choosing a number of measures
to strengthen the business including the acceleration of the
Improvement Plan.”
Kevin Freeguard CEO
Accelerating our transformation
.
Strategic priority • Enriching the customer experience and
enhancing our service delivery capability • Improving
organisational alignment and performance
What we said we would do
• Enhance our scalable and agile delivery model for clients with
dedicated Fulfilment expertise
• Improve talent engagement capability
• Create common Group methodology
• Deliver the best client and candidate experience
• Align our operating model and organisational structure to enable
the business to scale
• Find, develop and retain great people
• Implement our single end-to-end technology platform
• Build common processes across the Group
What we did • We continued to expand and scale our Fulfilment
operations, reorganising the business to form a core dedicated
delivery capability servicing all of our locations. This has
enabled us to be agile to client and market needs by creating scale
and pace when needed whilst reducing our time to hire and cost to
serve
• Created a more customer-centric common methodology for Fulfilment
which has streamlined delivery and deepened relationships with key
clients. Ensured consistency of service, improving the efficiencies
of our staff whilst maintaining high standards of delivery for both
clients and candidates
• Worked with clients to improve their candidate experience. We
mapped their candidate journeys and implemented improvements,
ranging from small well-placed interventions to redesigning the
whole process to ensure candidate pipelines were nurtured and
engaged throughout the entire talent journey. Since the year end,
our Gattaca Solutions won ‘Best Candidate Experience’ at the Talent
International Annual Recruitment Awards (TIARA) for our work on
reinventing the candidate experience for one of our clients
• Our new single end-to-end technology platform has remodelled and
enhanced many of our own candidate and client experiences.
Contractors will be able to on-board, manage their timesheets,
expenses, holiday quotas and payslips via a single sign-on. Clients
will also receive an improved digital journey, saving them time and
increasing their visibility of their recruitment activity. This is
being rolled out to all areas of the business by the end of our
2021 financial year
• Implemented a number of digital tools that enhance both the
client and candidate experience as well as increase our response
rates. These include products that help candidates to research the
company they are interviewing for, to record their own video
applications and host live virtual interviews
• We continued to implement the fundamentals of the Improvement
Plan to maximise on the efficiencies gained from our organisational
alignment, making sure that we were evaluating and developing our
people so they were playing to their strengths, ensuring the best
sales people sell, the best account managers deliver excellent
customer experiences, and we have subject matter experts in our
support functions
• Appointed a new HR Director with a wealth of operational
recruitment sales experience
• Redesigned a recruit and retain programme including building a
joiner community to ensure new starters have an excellent
experience
• Developed a new Sales Academy and implemented a digital coaching
platform that identifies individual needs in real time, in addition
to a new digital staff development and training portal
• Despite the economic pressures of the pandemic we have maintained
investment and development of our single end-to-end technology
platform, due to be implemented in 2021. This entails a major
technology refresh of front end and back end internal systems
• Part of our new technology transformation has included updating
and mapping all our business processes. This will give us a more
consistent and efficient way of working, ensure productivity levels
are maximised as well as improving our customer journeys
Priorities for next year
• Further evolution and growth of our Fulfilment operations, to
cultivate more clients, markets and skills to continue the
expansion of our delivery capability
• Embed and optimise investment from this year. Once all areas of
the business are on our new technology platform, iteratively refine
new business processes and continue to optimise them. Research and
invest in further improvements to the candidate and client
journeys
• Continue to evolve our people strategy to suit the current
climate, ensuring effective remote working, digital learning and
development, reward, recognition and wellbeing whilst maintaining a
high performance culture. Implementation of a new platform for the
monitoring and continuous improvement of staff engagement, so that
we can utilise regular actionable insights to adapt our people
strategy over time
• Complete the implementation of our single end-to-end technology
platform and ensuring we exploit the full benefits. One global
platform will provide an instant and consistent view across all
Group trading activities at any given time, enabling us to utilise
this single source of data to manage the business in a
forward-looking way. Utilise real time, transparent reporting at an
individual level as a critical enabler for the business, to support
with performance management and spot learning interventions
• Further improve collaboration and cross selling across the Group
once all employees have access to the new internal technology
platform
18 Gattaca plc Annual Report and Accounts 2020
.
Strategic priority • Enriching the customer experience and
enhancing our service delivery capability • Improving
organisational alignment and performance
What we said we would do
• Enhance our scalable and agile delivery model for clients with
dedicated Fulfilment expertise
• Improve talent engagement capability
• Create common Group methodology
• Deliver the best client and candidate experience
• Align our operating model and organisational structure to enable
the business to scale
• Find, develop and retain great people
• Implement our single end-to-end technology platform
• Build common processes across the Group
What we did • We continued to expand and scale our Fulfilment
operations, reorganising the business to form a core dedicated
delivery capability servicing all of our locations. This has
enabled us to be agile to client and market needs by creating scale
and pace when needed whilst reducing our time to hire and cost to
serve
• Created a more customer-centric common methodology for Fulfilment
which has streamlined delivery and deepened relationships with key
clients. Ensured consistency of service, improving the efficiencies
of our staff whilst maintaining high standards of delivery for both
clients and candidates
• Worked with clients to improve their candidate experience. We
mapped their candidate journeys and implemented improvements,
ranging from small well-placed interventions to redesigning the
whole process to ensure candidate pipelines were nurtured and
engaged throughout the entire talent journey. Since the year end,
our Gattaca Solutions won ‘Best Candidate Experience’ at the Talent
International Annual Recruitment Awards (TIARA) for our work on
reinventing the candidate experience for one of our clients
• Our new single end-to-end technology platform has remodelled and
enhanced many of our own candidate and client experiences.
Contractors will be able to on-board, manage their timesheets,
expenses, holiday quotas and payslips via a single sign-on. Clients
will also receive an improved digital journey, saving them time and
increasing their visibility of their recruitment activity. This is
being rolled out to all areas of the business by the end of our
2021 financial year
• Implemented a number of digital tools that enhance both the
client and candidate experience as well as increase our response
rates. These include products that help candidates to research the
company they are interviewing for, to record their own video
applications and host live virtual interviews
• We continued to implement the fundamentals of the Improvement
Plan to maximise on the efficiencies gained from our organisational
alignment, making sure that we were evaluating and developing our
people so they were playing to their strengths, ensuring the best
sales people sell, the best account managers deliver excellent
customer experiences, and we have subject matter experts in our
support functions
• Appointed a new HR Director with a wealth of operational
recruitment sales experience
• Redesigned a recruit and retain programme including building a
joiner community to ensure new starters have an excellent
experience
• Developed a new Sales Academy and implemented a digital coaching
platform that identifies individual needs in real time, in addition
to a new digital staff development and training portal
• Despite the economic pressures of the pandemic we have maintained
investment and development of our single end-to-end technology
platform, due to be implemented in 2021. This entails a major
technology refresh of front end and back end internal systems
• Part of our new technology transformation has included updating
and mapping all our business processes. This will give us a more
consistent and efficient way of working, ensure productivity levels
are maximised as well as improving our customer journeys
Priorities for next year
• Further evolution and growth of our Fulfilment operations, to
cultivate more clients, markets and skills to continue the
expansion of our delivery capability
• Embed and optimise investment from this year. Once all areas of
the business are on our new technology platform, iteratively refine
new business processes and continue to optimise them. Research and
invest in further improvements to the candidate and client
journeys
• Continue to evolve our people strategy to suit the current
climate, ensuring effective remote working, digital learning and
development, reward, recognition and wellbeing whilst maintaining a
high performance culture. Implementation of a new platform for the
monitoring and continuous improvement of staff engagement, so that
we can utilise regular actionable insights to adapt our people
strategy over time
• Complete the implementation of our single end-to-end technology
platform and ensuring we exploit the full benefits. One global
platform will provide an instant and consistent view across all
Group trading activities at any given time, enabling us to utilise
this single source of data to manage the business in a
forward-looking way. Utilise real time, transparent reporting at an
individual level as a critical enabler for the business, to support
with performance management and spot learning interventions
• Further improve collaboration and cross selling across the Group
once all employees have access to the new internal technology
platform
19Governance Financial StatementsOverview Strategic Report The
Improvement Plan
What we do Candidates In-depth knowledge of a market enables us to
advise our candidates on their options and identify the best areas
of fit with our clients.
Market presence Vertical focus and wide geographical spread enables
us to attract a broad range of clients and candidates.
Tailored product offering
providing bespoke solutions to meet
their needs.
C an
di da
te s
their specialist in-depth market knowledge to benefit both
clients
and candidates.
Our Business Model
Clients In-depth candidate knowledge enables us to advise clients
on attraction approach, location, speed, method and cost.
Markets In-depth knowledge of working with start-up businesses
through to multinational blue-chip giants enables us to have a
complete view on the entire market.
Market-leading delivery
Our fulfilment expertise and focus on engineering and technology
skills enables us to
offer candidates a breadth of opportunities with short time to
hire. This means we can offer clients candidates
from transferable STEM sectors.
20 Gattaca plc Annual Report and Accounts 2020
• Our market expertise helps us advise them on dynamics in their
competitive landscape
• Our ability to quickly identify the best high-quality
candidates
• Our range of especially designed services enable us to solve our
clients’ talent challenges, from one- time hire through to
enterprise-size integrated solutions
For clients
9 major markets that we specialise in
• Strong brand reputation helping them to secure new business or
identify great talent
• Career progression
• Market-leading benefits scheme
• Training to become a successful market expert, surrounded by a
positive and friendly culture
For employees
78% positive engagement score
• Expanding range of career opportunities across all major markets
with clients from start-ups through to multinationals
• Market expert consultants who can help STEM skill candidates
transition across markets and geographies
• A great candidate experience, providing the opportunity to work
with highly experienced and skilled consultants who will support
them throughout their career
• Strong governance giving candidates reassurance that their data
is being handled well and their employment models are
compliant
For candidates
• Providing market-leading solutions with a trusted
reputation
• Operating in defined, high-growth markets
• Deep expertise with revitalised leadership
• Focused growth strategy
• Resilient business model
How we create value for our stakeholders
21Overview Governance Financial StatementsStrategic Report Our
Business Model
Delivering the skills to restart
Food delivery With the huge demand for home food deliveries one of
our clients focused on expanding their technology arm to meet the
demand, including automated robots for picking and placing
groceries. We supported with placing talent to work on the repairs,
diagnostics and maintenance in their global robots testing centre.
There was also need for technology skills in distribution systems
for the delivery networks to meet demand.
COVID-19 testing The manufacture of laboratory enclosures for
COVID-19 testing has been critical to ensure that the volume of
testing required each day can be completed. We supplied engineers
during the peak of the virus, with continuing demand expected into
2021 as testing for the virus continues to be essential.
Logistics & planning COVID-19 led to an increased demand for
logistics planners for emergencies services and delivery networks.
We delivered a number of packages of work with public bodies to
complete the planning and design for projects, such as revised bus
lanes and bus stops required due to COVID-19 social distancing
measures.
Data The use of data during a pandemic is critical. We placed
technology specialists into the UK Department of Health and the NHS
who worked on exploring data sets and models, producing assessments
and insights into how to control the spread of COVID-19. We also
supplied candidates who assured the provision of medical supplies
to the Complex Case Investigation team.
Transport networks During the UK lockdown there was an increase in
demand in rail freight roles to support the need to transport
essential cargo. We provided talent into highway maintenance as a
vital network that allowed timely delivery of medical supplies,
equipment and medicines as well as essential food
distribution.
Our Business Model in Action
Providing the skills needed to keep the world running As some of
our markets and the skills we place were deemed as frontline
services through the height of the COVID-19 pandemic, it had never
been so important than to utilise our networks in order to ensure
the population continued to receive vital utilities. These are some
of the examples of markets and projects we are proud to have
supported, many of them requiring STEM skills:
Gattaca plc Annual Report and Accounts 202022
Connectivity With fibre and broadband services being deemed an
essential utility, fibre has been one of the fastest growing areas
for us in the second half of the year. Teams of individuals were
needed across a range of skill sets from technical planning through
to installation to ensure that people had the connectivity to
continue to work at home.
Power Skilled engineers and technologists in the Energy market
continually worked throughout lockdown and beyond, not only keeping
the lights on around the world, but also installing power into
crucial new buildings such as the UK Nightingale hospitals.
Water and wastewater Similarly, it was vital to keep the water
industry running to ensure maintenance of essential services and
public health. With limitations on the mobility of candidates due
to lockdown and the increased number of client staff in isolation
or quarantine, we continued to support our clients to find labour
for such a critical resource.
Digitalisation of learning, training and development programmes
COVID-19 led to many companies looking to accelerate their
digitalisation plans, where previously they were reliant on
traditional in-office training. We supported clients to rapidly
design and build online training programmes for their staff, and
also with the build of digital learning platforms, which was
particularly important in order for companies to maintain their
apprenticeships and to ensure a new tranche of apprentices could
still start as planned in September 2020.
Defence The Defence market was one of the most stable markets in
resourcing this year. The UK Government moved quickly to classify
Defence personnel as key workers so they could carry on to support
critical projects that could not be placed on hold. With the
sensitive nature of project work there was a continued need for
onsite security cleared workers. We also worked with our Defence
clients to define compliant security processes for new hires and
on-boarding during the period of lockdown. There was an increase in
demand for cyber security skills with people working outside of
companies’ usual security networks, and we assisted in the growth
of a major cyber security client who saw increased volume of demand
in the United States, supported by us via our RPO model.
We provide talent that the world relies on. The candidates we
source and connect with
our clients are inventing, designing, installing and operating
products, systems and infrastructure that
improve our day-to-day lives.
Operating Review
Business Mix Our contract business has proved more resilient in the
current trading environment, with net fees down 20% in the period
on a continuing basis, which is a testament to our historic
strategic focus in this area. Contract now accounts for 73% (2019
restated: 71%) of Group Net Fee Income (‘NFI’) on a continuing
basis, at £39.5m (2019 restated: £49.1m). Contract gross margin on
a continuing basis was 7.6% (2019 restated: 8.2%).
Permanent recruitment, which was more susceptible to the economic
shocks in the year, declined 26% on prior year with net fees of
£14.5m (2019 restated: £19.7m). Permanent net fees represented 27%
(2019 restated: 29%) of Group NFI on a continuing basis.
Other NFI arising from provision of engineering services and other
fees was £0.3m (2019: £0.2m).
UK Engineering Revenue was £416.5m (2019: £475.9m), NFI decreased
by 19% to £39.8m (2019: £49.4m) and operating contribution (before
central overheads) was £24.5m (2019: £27.5m). UK Engineering
represents 73% of Group continuing NFI.
The UK Engineering business was impacted by challenging market
conditions in the year, particularly the UK general election,
Brexit uncertainty and the proposed IR35 regulatory changes now
delayed until April 2021. However, the main factor in the overall
performance decline was the unprecedented effects of the pandemic,
even though our strategic bias to contract business within UK
Engineering has provided some resilience in the current
trading environment.
Within the Infrastructure market, NFI was 15% lower than the prior
year. Demand was particularly strong within the Highways and Civil
Engineering market driven by the ‘Routes to Market’ initiative,
increased funding for UK motorway infrastructure and the rollout of
high speed fibre connectivity across the UK. Demand in both the
Water and Rail markets remained constant on essential maintenance
projects, however, project based construction, demand dropped
significantly whilst COVID-19 compliant ways of working were being
identified, and teams remobilised. The new Rail funding cycle CP6,
UK Government commitment to HS2 and the Water investment cycle,
AMP7 have been slower than anticipated to ramp up activity, however
we see this as a short-term issue with demand building through
2021.
We anticipate the UK Government will continue to prioritise
spending on transportation, infrastructure and utilities projects,
which are significant and established markets for Gattaca.
The Energy division was 18% lower than the prior year. The Oil and
Gas market remains turbulent, with deferred investment decisions
subsequently shelved and therefore demand for contract labour
driven down by COVID-19, sector politics and weak global commodity
prices. The transmission and distribution market, where our work is
focused on the maintenance of essential networks, was consistent
through the year. The Renewables Energy market continues to offer
opportunity with strong project investment globally; and we flexed
our focus to capitalise on this trend.
Mobility was the most impacted of all our markets due to a lack of
end customer investment during H1 and the H2 impact of COVID-19,
with NFI 35% lower than the prior year.
The Defence market continues to be core to our business. National
security, maritime and defence infrastructure programmes, including
the QEC aircraft carriers, Dreadnought, Tempest, Morpheus and Type
31 frigates, are key UK Government priorities with increased
spending announced. As a result, we see opportunity in this market
across both engineering and technology skills.
We have restructured our teams and utilised the government furlough
to match resources to demand whilst continuing to support
contractors and staff in each of our markets. Where demand was
lower, we also redistributed staff between teams to maximise
efficiency.
UK Technology On a continuing basis, revenue was £104.3m (2019:
£136.1m), NFI declined by 31% to £8.0m (2019: £11.6m) and operating
contribution before central overheads was £3.4m (2019: £5.9m). UK
Technology represents 15% of Group continuing NFI. Whilst this
business did decline in H1, our actions stabilised it in Q2 and Q3
and we saw this as a key inflexion point; however, COVID-19
negatively impacted the business in Q4.
The constant development of the IT industry and need for STEM
skills across the UK offers an excellent opportunity for our
Technology business to return to growth.
A positive performance in 2020
24 Gattaca plc Annual Report and Accounts 2020
Whilst there have been many businesses affected and technology
roles lost, the importance of having the correct technology stack
and strategy has grown. There is continued developing demand for
technology skills such as DevOps, Security, Data Science, Cloud,
AI, Cyber and all front- end and back-end programming languages,
all of which balance well alongside the established demand for PM,
Support, Electronic Systems Engineering, Controls and Automation
skill sets.
To ensure that we are optimally positioned to take advantage of
these market trends, we have a new leadership team in place and
have aligned the business to market sectors, specifically Defence,
BFI (Banking, Finance & Insurance), TMT (Tech, Media and
Telecoms), Energy and Public Sector. The latter two markets have
shown resilience through the pandemic with some of our other
markets now showing improved signs of activity in areas such as
Infrastructure and Mobility. For 2021, we will manage and report
the legacy Engineering Technology business unit as a core element
of UK Technology, ensuring consistency across the full Technology
stack.
We see technology as a major growth opportunity in the recovery of
the UK economy, and the shifting global trends towards big data, AI
and flexible working will ensure that technology skill sets play a
critical role over the long term. The work to restructure the
Technology business unit, recruiting new leadership and
revitalising the team, will enable us to take advantage of
these opportunities.
International On a continuing basis, revenue was £17.8m (2019
restated: £22.3m), NFI declined by 19% to £6.5m (2019 restated:
£8.0m), and operating contribution before central overheads was
£1.3m (2019 restated: £1.9m). International operations represent
12% of the Group’s continuing NFI. Each of our International
operations has been impacted by COVID-19 with country and state
lockdowns affecting trading. As with the UK, we have ensured
business continuity by quickly switching to remote working in each
of our international locations.
International H2 NFI was 16% lower than the prior year. The US
business continued to reposition itself away from an historic over-
reliance on a small number of sole supply clients, with the
successful delivery of our first RPO within the cyber market and
being appointed as a 1st Tier supplier on a major Energy market
PSL. We also took the opportunity to restructure the International
leadership and sales team, resulting in a leaner, more efficient
sales function.
During the year we ceased operational activity in China as we
prioritised other markets.
Gattaca Solutions As a cross-section of our UK Engineering, UK
Technology and International businesses, Gattaca Solutions
represented 29% of Group NFI (2019: 27%). Gattaca Solutions is a
critical element of our growth strategy as it allows us the
opportunity to solve critical client staffing issues through deep
long-term customer relationships.
Gattaca Solutions dedicates account management support to these
client relationships, and in many cases embeds our teams into our
clients’ businesses to enable a deeper and more collaborative
relationship. Buying behaviours within the UK staffing market
continue to shift towards the outsourced recruitment model, which
Gattaca Solutions offers.
We have seen another strong year of account retention within
Gattaca Solutions, reflecting the quality of service and value that
Gattaca Solutions brings to our clients. Following the year end, we
were delighted to be recognised for the quality of our service,
winning the 2020 TIARA Talent Solutions award for Best Candidate
Experience.
Gattaca Solutions accounts include customers who are critical to
national infrastructure, utilities and defence, and in these areas
we have seen volumes least affected and the quickest to recover,
from any COVID-19 impact.
Gattaca Projects, which provides professional and expert outcome
based engineering and technology support solutions, has grown by
14.2% on prior year, albeit from a small base. This is driven by a
new key defence client with whom we have started delivering on
long- term project delivery agreements in 2020.
Kevin Freeguard Chief Executive Officer
3 November 2020
Key Performance Indicators
Financial KPIs Due to the discontinuation of certain operations in
2020 and 2019, the Group has chosen again to present a number of
adjusted KPIs for continuing operations as a more representative
measure of ongoing business. 2019 figures for continuing operations
have been restated for the presentation of operations discontinued
in 2020, as explained in Note 11 of the consolidated financial
statements.
£54.7m (2019: £72.1m)
£27.3m (2019: £(24.8)m)
Measurement explained NFI, equivalent to gross profit, is revenue
less cost of sales, predominately the sum of contract NFI and fees
for the placement of permanent candidates, less any directly
attributable adjustments or rebates.
Rationale Indicates the volume of business generated in the year
and is a prerequisite to any sustainable bottom line growth.
Measurement explained The amount of underlying profit for the year
per one share in the Group; calculated as the continuing underlying
profit attributable to the Group’s equity shareholders, divided by
the average number of shares in issue throughout the year.
Rationale A strong indication as to the underlying continuing
profitability of a company for its shareholders.
Measurement explained Underlying profitability of the Group for
continuing operations before interest and taxes with adjustments
for non-recurring costs, impairment and amortisations of acquired
intangibles and impairment of right-of-use leased assets.
Rationale Demonstrates the profitability of the Group and how
efficient it is at managing its controllable cost base.
Measurement explained Profitability of the Group from continuing
operations before tax with adjustments for non-recurring costs,
impairment and amortisations of acquired intangibles, impairment of
right-of-use leased assets and foreign exchange differences.
Rationale Demonstrates the profitability of the Group and how
efficient it is in managing its cost base, before taxation.
Measurement explained Underlying continuing profit from operations
expressed as a percentage of continuing NFI.
Rationale Indicates the efficiency of fee earners in generating
NFI, the Group’s ability to control central costs and the level of
investment in future growth.
Measurement explained NFI from continuing operations is revenue
less cost of sales from continuing business, predominately the sum
of contract NFI and fees for the placement of permanent candidates,
less any directly attributable adjustments or rebates.
Rationale Indicates the volume of continuing business generated in
the year.
Measurement explained Total Group debt excluding lease liabilities,
less any cash and cash equivalents, after capitalised
financing costs.
Rationale Adjusted net cash/(debt) is a key element of the Group’s
capital structure. Gattaca is committed to showing a sustained
reduction in adjusted net debt.
2016 201673.0 (25.0)
2017 201774.7 (40.3)
2019 restated 2019
Underlying profit from continuing operations (£m)
Continuing underlying profit before taxation (£m)
Adjusted Net cash/(debt) (£m)
26
24
28
30
27
19
20
21
13
13
87% / 13% (2019: 87% / 13%)
72% / 28% (2019: 72% / 28%)
73% / 27% (2019: 70% / 30%)
Measurement explained Total NFI divided by the average
annual number of sales heads.
Rationale Indicator of staff productivity, with growth
demonstrating an improved efficiency in fee earner activity or a
higher percentage of fee earners at full capacity.
Measurement explained Total NFI generated from business operations
outside of the UK, expressed as a percentage of total Group
NFI.
Rationale Geographic diversification spreads risk and reduces
reliance on any one economy.
Measurement explained The ratio of fee earning versus operational
support staff headcount taken as an average for the year.
Rationale Demonstrates the Group’s ability to maintain a consistent
balance of sales and support headcount throughout other business
changes.
Measurement explained Total NFI generated through temporary
contractor placements or permanent placements separated out and
expressed as a percentage of total Group NFI.
Rationale Contract NFI provides better visibility of income and
generates long-term relationships with our clients. Growth in
permanent recruitment NFI enables the Group to benefit quickly from
operational gearing.
113.42020
£1.70 (2019: £1.68)
78% (2019: 78%)
Measurement explained Total NFI divided by the annual costs of all
staff in the Group.
Rationale Key staff productivity metric for Gattaca, as well as
reflecting the operational efficiency of the business as a
whole.
Measurement explained An Engagement Index based on employee
responses to seven actionable workplace elements.
Rationale Employee engagement has proven linkages to performance,
productivity, customer service, quality, retention and increased
profit.
81
Staff mix (%)
27Overview Governance Financial StatementsStrategic Report Key
Performance Indicators
2020 has been another year of intense activity We continued our
work on repositioning the business, including a much strengthened
balance sheet, and of course managing the impact of the global
pandemic.
CONTI NUIN
This year’s highlights • Continuing underlying profit before tax
of
£4.6m for the year (2019 restated: £11.7m)
For further information Page 29
• Adjusted net cash, which excludes IFRS 16 lease liabilities, rose
to £27.3m (2019: adjusted net debt £(24.8)m)
For further information Page 31
• Repayment and cancellation of the Revolving Credit Facility post
year end, leaving the Group covenant free
For further information Page 33
• Cost reductions and the acceleration of the Improvement Plan
resulting in £4m annualised future cost savings from November
2020
For further information Page 30
28 Gattaca plc Annual Report and Accounts 2020
Financial performance On a continuing basis, revenue of £538.7m
(2019 restated: £634.3m) generated NFI of £54.3m (2019 restated:
£69.1m). We achieved contract NFI of £39.5m (2019 restated: £49.1m)
at a margin of 7.6% (2019 restated: 8.2%), and permanent
recruitment fees of £14.5m (2019 restated: £19.7m).
Profit before tax from continuing operations was £1.4m (2019
restated: £3.4m).
Statutory loss after tax for the total Group was £1.8m (2019: £5.9m
loss).
Net cash at 31 July 2020 (excluding lease liabilities) improved
considerably to £27.3m (2019: net debt of £24.8m), a £52.1m
improvement including the benefit of £10.3m of VAT deferrals and a
change from recourse to non-recourse financing worth £13.8m at year
end, in addition to improvements in contractor terms, DSO (‘Day
Sales Outstanding’) and volume related movements as explained on
pages 31 and 32.
Underlying results Underlying results are shown beneath the Income
Statement. Underlying continuing profit before tax at
£4.6m (2019 restated: £11.7m) was £7.1m below last year with the
most significant factor being the impact of the COVID-19
pandemic.
Whilst we moved to full remote working within days of the various
national restrictions without any interruption to our operational
capability, we saw a significant and relatively sudden reduction in
trading volumes, and having anticipated this, took early mitigating
actions on our cost base, including acceleration of Improvement
Plan efficiencies. We were also able to achieve significant
positive changes in terms of digitisation and process
optimisation.
We delivered £4.6m of underlying profit before tax, eliminated debt
and are now in a strong net cash position.
Discontinued operations and non-underlying costs The Group-wide
Improvement Plan continued at pace during 2020 and drove some of
the non-underlying costs below:
£’000 Profit/(Loss)
Before Tax
Discontinued operations losses and related restructuring costs
primarily with respect to China (1,225)
Amortisation and impairment of acquired intangibles (950)
Impairment of right-of-use leased assets (one building on our
Whiteley campus) (432)
Gain on sale of investment in Concilium Search Limited 304
Foreign exchange differences (521)
Reported statutory for the total Group (1,183)
The acceleration of certain elements of the Improvement Plan
enabled restructuring both during FY20 and in the early part of
FY21 and our financial statements include both the actual costs
incurred in FY20 and a provision of £1.0m included in the £1.6m
restructuring costs above for known redundancy costs for the
initiatives that have been implemented in the first quarter of our
2021 financial year.
Despite changes in local staffing and strategy, our China business
was not generating appropriate returns and this business was closed
during the year, allowing us to devote resources to markets with
greater potential.
We continue to cooperate with the US Department of Justice (‘DoJ’)
and there have been no significant new matters in this regard
during
the year. Legal fees on this matter were £1.4m in the year (2019:
£3.4m), the vast majority of which were incurred in the first half
of the year. As shown in Note 28 to the Financial Statements, the
Group is not currently in a position to know what the outcome of
these enquiries may be, therefore we are unable to make any type of
quantification of the potential financial impact, if any.
29Overview Governance Financial StatementsStrategic Report Chief
Financial Officer’s Report
Chief Financial Officer’s Report continued
During the year, we took an additional impairment charge of £0.3m
(2019: £5.9m) writing off all remaining intangible asset values
relating to the UK Technology business of Networkers, acquired in
2015. All International intangible asset values relating to
Networkers were written off in prior periods. Amortisation of
acquired intangible assets was £0.6m (2019: £1.3m)
Following the closure of our Bromley office last year, we have also
made the decision to close one of the buildings on our Whiteley
campus. This was primarily enabled by the restructurings noted
above. We fully intend to build on the positive lessons learnt
during the UK lockdown, including the benefits of flexible working.
In the long run this is likely to mean a hybrid approach and using
our offices in different ways to before. We expect the remaining
office space in London Bridge, Whiteley and Winnersh to be
sufficient for the business as we grow through the recovery and
beyond.
Cost actions and UK Government Coronavirus Job Retention Scheme We
took significant cost actions during the year to mitigate as much
of the impact of reduced NFI as
possible, and welcomed the UK Government Job Retention Scheme which
enabled us to support staff and contractors.
The UK Government Job Retention Scheme enabled us to take a more
considered view of the resourcing level adjustments necessitated by
the abrupt and significant changes in the economic landscape.
Without the scheme we would have been compelled to make significant
reductions to our workforce at the start of the lockdown, and
inevitably this would have been more severe when uncertainty was at
its highest.
During the year, we claimed £2.3m with respect to our contractors
and £1.5m with respect to our staff enabling us to provide
continued financial support to individuals whilst we and our
clients took the appropriate time to assess our needs with much
greater knowledge around the short and likely medium- terms impacts
to our businesses and the necessary cost actions.
Staff and Directors who remained working in the business during
this time also made a sacrifice through a 20% reduction in salary
for a period of time, reducing 2020 costs by £1.1m. In
addition
we reassessed structures in the UK and internationally, with some
de- layering, which benefited results in 2020 by £1.7m. Commissions
were lower by £3.6m due to lower trading volumes and there were no
Board and central staff bonuses saving £1.8m compared to prior
year. In September 2020 we concluded a staff consultation process,
the impact of which will be a further reduction of £4.0m in staff
costs on an annualised basis. We will review our staffing needs as
the recovery takes shape. At this time, we believe we have
significant capacity to absorb increased trading without the need
to increase significantly overall headcount.
Taxation The Group’s reported effective tax rate of 50.5% (2019:
31.6%) was driven up by the impact of overseas losses not
recognised as deferred tax assets. The continuing underlying
effective tax rate was 27.9% (2019 restated: 21.5%), similarly
impacted by the same overseas losses.
Earnings per share Basic earnings per share was negative 5.5 pence
(2019: negative 18.3 pence), and on a fully diluted basis was
negative 5.5 pence (2019: negative 17.8 pence).
45
40
50
55
60
£ ’m
30 Gattaca plc Annual Report and Accounts 2020
Continuing underlying basic earnings per share was 10.3 pence (2019
restated: 28.4 pence).
Dividends We are very much cognisant that our shareholders have
shown great patience as we have worked to strengthen our balance
sheet and reposition the business. Given the economic headwinds the
UK faces over the next six months the Board is not recommending a
final dividend for 2020. We are however committed as a Board to
restoring the dividend at the earliest opportunity.
Capital expenditure Capital expenditure in the year was £2.6m
(2019: £3.5m) of which £2.3m related to software. Having a single
set of integrated and effective systems across the Group is
critical to our long-term success and during the lockdown we
maintained the pace of our Primary Business Systems project. One of
our subsidiaries is already live on the system and we expect all of
our businesses to be operating on the new systems by the end of
FY21.
Sale of holding in Concilium On 27 November 2019, we sold our 10%
holding in Concilium Search Limited realising a gain of £0.3m which
has been included in non- underlying items.
Net assets and shares in issue At 31 July 2020, the Group had net
assets of £39.8m (2019: £41.9m) and had 32.3m (2019: 32.3m) fully
paid ordinary shares in issue.
40
30
20
10
0
-10
-20
-40
£ ’m
(24.8)
31Overview Governance Financial StatementsStrategic Report Chief
Financial Officer’s Report
Chief Financial Officer’s Report continued
Cash flow and net debt Net cash at 31 July 2020 was £19.6m (2019:
net debt £(24.8)m). Adjusted net cash (net cash excluding IFRS 16
lease liabilities) was £27.3m (2019: net debt £(24.8)m). Reducing
our financial leverage has been a key objective for the last three
years and we are pleased with this progress, having had net debt of
£(40.3)m at 31 July 2017. As the UK was heading towards lockdown,
we took immediate measures to ensure our balance sheet could
weather whatever storms might lie ahead and prior to the
announcement by the Chancellor on the UK-wide Government support
schemes, we were able to secure agreement from HMRC to defer our
VAT payments until the end of March 2021, and other tax payments
for a shorter period. At 31 July 2020, our cash position included
the benefit of £10.3m from these deferrals.
A further element of the improvement is driven by reduced trading
activity which enabled an unwinding of working capital. We expect a
very substantial element of the overall working capital improvement
to be permanent as described below.
We have changed the payment terms for contractors earning above a
certain level from seven to 28 days which is in alignment with
normal payment cycles for businesses and most company employees.
This change reduces significantly the gap between payments to
contractors and payments from our customers. As well as the
immediate benefit at the point of change, the new terms should mean
a lower requirement for additional working capital as our business
grows through the inevitable economic recovery and thereafter. We
have so far effectively reduced the period of funding business from
20 days to 16 days and as this change initiative was still in the
process of implementation at year end, we expect further
improvement as this initiative is further embedded.
We have also continued to improve further our cash collections
capability with DSO (days sales outstanding, based on a three- m